US Congress dives into Wells Fargo case, executives to meet panel

A Wells Fargo executive's departure with large stock and options holdings has sparked questions after the division she ran incurred $185 million in penalties

Wells Fargo said last week it would pay $185 million in penalties and $5 million to customers that regulators say were pushed into fee-generating accounts they never requested for.

The sales goals will be eliminated by January 1, the San Francisco-based bank announced Tuesday.

Mary Eshet, spokeswoman for Wells Fargo, told CNBC that Tolstedt was not available for comment.

The investigation is being conducted by the USA attorney’s offices for the Southern District of NY and the Northern District of California, these people said.

Fortune first reported Monday that Tolstedt would leave the company with a large payout despite having been in charge of the division.

But that “cross-selling” strategy is now under intense scrutiny after the bank was caught creating over 2 million fake bank and credit card accounts without the knowledge or consent of its customers. Wells Fargo reviewed 82 million checking accounts and 11 million credit cards as part of its inquiry into the matter, which covered activity dating to 2011.

In some cases, Wells Fargo employees even created fake email addresses to sign up customers for online banking services, regulators said. The bank didn’t admit or deny wrongdoing in its settlement. The bank also plans to spend $50 million each year for “enhanced training, monitoring, and controls”, as well explore more disciplinary actions over these abuses, Chief Financial Officer John Shrewsberry said at an investor conference the same day. Although the bank has eliminated sales goals for retail staff, Stumpf said “cross-selling” products from various businesses to customers is still important to growing its business.

At midday, shares of Wells Fargo were down 3.4 per cent at US$46.91.

“When Carrie Tolstedt’s retirement was announced in July, Wells Fargo CEO John Stumpf called her a “dear friend, ‘ ‘role model” and ‘standard-bearer for our culture’”. That reduced the firm’s market value to US$236.9 billion (S$323.6 billion), compared with US$240.3 billion for New York-based JPMorgan.

The shocking scandal has rocked the banking industry and raised serious questions about the sales culture that led to the opening of unauthorized accounts. An 27-year veteran of the bank, Tolstedt ran the community banking division where regulators said aggressive sales goals fueled illegal behavior by bank employees.

A Loss of Trust: “As a bank customer … my reaction was one of horror”, says Conti-Brown of how he felt when he heard about the Wells Fargo findings.

It said 115,000 of those accounts had incurred a fee that Wells Fargo has since refunded to customers. (It has also reimbursed $2.6 million to customers).

Following criticisms that US authorities had failed to hold bankers to account in the aftermath of the financial crisis, the Justice Department last September issued a policy requiring all civil and criminal cases begin and end with a focus on individual accountability.